THE GOVERNMENT HAS announced that carbon tax will be increased by €7.50 per tonne of Co2.

Announcing the measure in his Budget 2021 speech this afternoon, Finance Minister Paschal Donohoe said the tax hike will come into effect tonight for petrol and diesel and for all other fuels by 1 May 2021.

The increase will bring the carbon tax from €26 to €33.50 per tonne of CO2.

It will add about 2.5c per litre of petrol and diesel. 

Legislation will also be provided in the Finance Bill which will see the tax increase each year by €7.50 up to 2029 and by €6.50 in 2030 – to bring it up to €100 per tonne of CO2.

Announcing the hike, Donohoe said that the additional revenue raised will be used to meet the government’s climate action goals.

“This increase is another important step in our collective action to decarbonise our economy. Measures that help to reduce our emissions levels, also help to improve our quality of public health,” Donohoe said.

Motor tax reforms

A new third motor tax table for cars registered from 1 January 2021 will be introduced to take into account a new, more accurate emissions test. 

He also made adjustments to motor tax to ensure a level playing field. Currently, nearly half a million cars are in the pre-2008 engine sized based regime; and approximately 1.6 million cars in the post 2008 CO2-based regime.

Rates will remain unchanged for all cars in the engine sized regime and all but the most pollutant cars in the post-2008 regime, the government said.

Donohoe said that the current New Europe Driving Cycle (NEDC) system has been “utterly discredited in terms of undervaluing the emissions output of motor vehicles”.

Therefore, he said, Ireland needs to transition its CO2-based Vehicle Registration System (VRT) regime to the new “more robust” Worldwide Harmonised Light Vehicle Test Procedure (WLTP) emissions system from January 2021.  

“This new regime will be based on emissions performance levels which are much closer to real world performance levels than is currently the case,” he said. 

“The modified new structure of rates and bands for VRT and motor tax have been adjusted to take account of the fact that cars under the new test record higher CO2 emissions,” explained Donohoe.

“We have strengthened the environmental rationale of the VRT regime to encourage motorists who are in the market for a new car to make greener choices.”